Proposed Dao Design Update

The Trustless Team
July 26, 2022

The previous DAO design blog post was focused primarily on lockups for everyone. One of the biggest motivations for having universal lockups was to combat people simply liquidity mining the token and then immediately selling it. However, during that conversation, trustindistrust.eth said that in his experience, the only thing proven to make a DAO token valuable was to accrue value to it. Lockups by themselves don’t do that. Dropping the requirement of token lockups for everyone opens up the DAO design space. 

Some background: 

In the current design, TCP’s primary way to accrue value is by charging positive interest on debt. Variable interest on debt also helps keep Hue on peg. In the current design, the DAO does not directly control the interest rate but instead the parameters of an automatic interest rate controller. The choice of interest rate indirectly influences how much income the system accrues to TCP and the value of Hue relative to the peg. 

Proposed Changes

  • No automatic TCP token lockups. This makes TCP more flexible and useful, and is far easier to implement with code.
  • One must voluntarily lock TCP for a period to vote, and the protocol directs TCP inflation to those who vote on a proposal. This aligns incentives between voters and the protocol.
  • The DAO controls the interest rate directly by voting on changes at a maximum cadence, and the automatic interest rate controller is removed. This allows the DAO to control protocol income more closely and makes it worthwhile for TCP holders to lock their tokens.
  • The number of TCP proposals that emit inflation rewards is capped at the maximum possible cadence of interest rate updates. This ensures that while there is an incentive to lock tokens and vote, there is no incentive to abuse the system by creating and voting on unnecessary proposals.

Remaining Features:

  • Quorum (minimum number of votes required for a proposal to pass)
  • Perpetual Foundation Funding (percentage of all rewards gets additionally minted to the foundation to ensure it always has funding)
  • Fully Decentralized Governance (permission-less governance system) 
  • Instant Execution (strictly timeboxed period where community members can instantly execute passing proposals to ensure quick responses during early protocol turbulence)

Thoughts? Feelings? Share your feedback in the #chat channel of the Trustless Discord!

Next: New Hue on zkSync >